Alpha is like Schroedinger's cat: Opalesque Zurich Roundtable

Swiss investors and banks have been early adopters of hedge funds and alternative investments, and many, such as UBS, still back hedge funds strongly with allocations of 10% to 18% in many discretionary mandates (page 6). But this doesn’t mean things are not changing. Until recently, a hedge fund’s total return was understood as beta plus alpha, but now actually part of the alpha can be described as alternative beta - market neutral factors that you can create in a systematic fashion. So now we have beta plus alternative beta (or alternative risk premia) plus alpha (page 8).

The proliferation of these risk premia strategies over the past couple of years has led to a commoditization of the space, and access to these return sources for institutional investors has much improved. Leading Swiss players such as Vontobel and Swisscanto Invest, the asset management arm of Zurich Kantonalbank and the 3rd largest asset manager in Switzerland, are offering investment solutions that simplify access to those risk premia indices or include them in balanced, diversified products (page 6-7).

But alpha remains the trickier part and appears to be just like Schroedinger's cat: when we could not measure it, it was very much alive, but now with better tools and academic framework to measure and analyze it, alpha appears to be dying. However, veteran investors believe that there will be a turnaround in active management and sophisticated risk-managed strategies, which are actually seen compatible and complimentary to risk premia and alternative beta investments.

The following speakers participated at the 2017 Opalesque Zurich Roundtable which was sponsored by Eurex:

Are smaller institutional investors overwhelmed by that approach? (page 9)

What are the right fees for true alpha? (page 9-10,16, 18)

How investors get stuck in “the conundrum” by demanding niche strategies and idiosyncratic returns, but on the other hand wanting big brand name manager with a lot of size. But these two things often don't go together (page 9)

How FinTechs like Fundbase want to reduce the total fees and costs to access alpha (page 10-11, 14-15, 18)

What contributes to the concentration in the hedge fund and funds of hedge funds industry? (page 15)

How has investing in hedge funds changed for smaller and mid-sized investors? (page 12-13)

How do investors perform strategy due diligence? (page 14)

How the hedge fund industry is forced to mature (page 16, 18). Where long/short investments beat the index by a long shot (page 16)

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